Multiple insurance: Italian Supreme Court rules on recovery action determined based on indemnity due

The Italian Supreme Court, with its ruling no. 4273/2024 of 16 February 2024 has ruled on a much-debated issue with few clear precedents. The court has clarified how to determine the amount due by each insurer if someone has multiple insurance.

 

The case at issue

One of the insurers involved in the case (Insurer X) issued an insurance policy covering med-mal liability of its doctors.

During a childbirth procedure, a newborn suffered permanent injuries. The parents attributed negligence to one of the attending doctors of the clinic covered by Insurer X.

In light of the claim, Insurer X indemnified the insured parties, paying EUR1,502,442 to the injured third parties. In 2010, Insurer X filed a lawsuit against the Insurer of the liable doctor indemnified under Insurer X’s policy (Insurer Y).

The argument was that the liable doctor was covered by two policies: one taken out by the clinic with Insurer X and the other one covering his own personal liability taken out by the doctor himself with Insurer Y. This constituted a case of dual insurance coverage as per art. 1910 of the Italian Civil Code.

Having fully compensated the affected parties, Insurer X brought a recovery action against Insurer Y in accordance with Article 1910 (4) of the Italian Civil Code. The claim was dismissed by the first instance Court.

Following the other instances of appeal and conflicting decisions, the case ended up before the Supreme Court which was asked to determine which proportional rule should be applied in case of multiple insurances covering the same risk.

The court was asked to clarify whether this measure should be based on each insurer's limit of coverage, divided by the sum of limits of coverage of all insurers involved, or whether it should be proportionate to the compensation owed.

 

The Supreme Court’s judgment

In view of the lack of unanimity among case law and jurisprudence, the court distinguishes between the two prevailing approaches that have been followed: one based on the limits of coverage and the other based on the compensation owed. It considered the second approach preferable from the perspective of both the literal, logical, and purpose-oriented interpretation of Article 1910 of the Italian Civil Code.

Under this approach, the insurer's share of the compensation should be calculated not on the basis of the insured value but on the basis of the actual compensation due under the contract.

The extent of the recovery action of one insurer against the other would be determined by multiplying the damage caused by the accident by the compensation due from each insurer, divided by the sum of the compensation due from all the insurers covering the same risk. In justifying its decision, the court emphasized the reasons to support this position:

• Firstly, the literal interpretation of Article 1910 of the Civil Code, which states that recovery rights are proportional to the compensation actually due and not to the limit of the policy.
• Secondly, the purpose-oriented interpretation leads to the same conclusion: the purpose of Article 1910 (4) (which stipulates: the insurer that has paid has a right of recourse against the others for pro rata apportionment according to the indemnities due under their respective contracts. If an insurer is insolvent, its share shall be divided among the other insurers) is to reduce the indemnity due, not the policy limit.
• Finally, under a logical standpoint, the criterion based on the policy limit would not be applicable in the case of an unlimited policy limit.

The court concluded that the recovery actions between insurers should be proportional to the actual compensation due under the policies.